September 29, 2010

Germany will make its final Great War reparations payment on the weekend:

West Germany, formed after defeat in 1945, took on responsibility for most of the outstanding principle and interest, settling the bill in 1983.

But there was a clause in the so-called London Debt Agreement of 1953 that interest on multi-million pound foreign loans taken out in the Weimar Republic era, to pay off the reparations bill, should themselves be repaid if Germany were ever reunited.

Payments on this interest began again in 1996.

‘On Sunday the last bill is due and the First World War finally, financially at least, terminates for Germany,’ said Bild, the country‚Äôs biggest selling newspaper.

Most of the money goes to private individuals, pension funds and corporations holding debenture bonds as agreed under the Treaty of Versailles.

The German government did not reveal how the money will be disbursed but it is understood that it is transferred to a holding account before being sent to the relevant bond and debt holders.
Most of these are American and French.

The Ontario prostitution ruling is on-line. The judge’s opinion of the experts (paras 352-358) is hiliarious.

The Canadian preferred share market slid again today, with PerpetualDiscounts losing 10bp and FixedResets down 11bp. After the redemption of CM.PR.R and CM.PR.A was announced, I wondered what would happen to TD.PR.M and TD.PR.N. Well … they’re both on the unpleasant side of the performance highlights table, but nothing too terrible has happened … yet.

PerpetualDiscounts now yield 5.54%, equivalent to 7.76% interest at the standard equivalency factor of 1.4x. Long corporates now yield about 5.1% (!) so the pre-tax interest-equivalent spread (also called the Seniority Spread) now stands at about 265bp, a sharp increase from the 245bp reported September 22, as long corporate yields have plummetted about 20bp while PerpetualDiscount yields are unchanged.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.3275 % 2,119.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.3275 % 3,210.5
Floater 2.87 % 3.29 % 78,023 19.00 3 -0.3275 % 2,288.3
OpRet 4.89 % 3.29 % 76,058 0.17 9 -0.1672 % 2,372.3
SplitShare 5.96 % -27.35 % 64,383 0.09 2 -0.3688 % 2,360.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1672 % 2,169.3
Perpetual-Premium 5.68 % 5.08 % 140,758 5.33 14 -0.2869 % 1,998.1
Perpetual-Discount 5.52 % 5.54 % 205,447 14.53 63 -0.1031 % 1,978.8
FixedReset 5.26 % 3.16 % 324,180 3.27 47 -0.1061 % 2,264.1
Performance Highlights
Issue Index Change Notes
HSB.PR.C Perpetual-Discount -1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-09-29
Maturity Price : 23.26
Evaluated at bid price : 23.50
Bid-YTW : 5.45 %
TD.PR.N OpRet -1.49 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-05-30
Maturity Price : 25.50
Evaluated at bid price : 25.86
Bid-YTW : 3.50 %
NA.PR.K Perpetual-Premium -1.20 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-06-14
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : 4.97 %
BAM.PR.R FixedReset -1.20 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-07-30
Maturity Price : 25.00
Evaluated at bid price : 26.45
Bid-YTW : 4.25 %
TD.PR.M OpRet -1.13 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-10-29
Maturity Price : 25.75
Evaluated at bid price : 26.15
Bid-YTW : -5.09 %
BMO.PR.P FixedReset -1.04 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-27
Maturity Price : 25.00
Evaluated at bid price : 27.51
Bid-YTW : 3.08 %
BMO.PR.L Perpetual-Premium -1.02 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-24
Maturity Price : 25.00
Evaluated at bid price : 26.20
Bid-YTW : 5.08 %
GWO.PR.J FixedReset 1.23 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 27.14
Bid-YTW : 3.29 %
BAM.PR.O OpRet 1.49 % YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2013-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.51
Bid-YTW : 2.72 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.A OpRet 413,500 Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2010-11-30
Maturity Price : 25.00
Evaluated at bid price : 24.97
Bid-YTW : 3.29 %
BNS.PR.P FixedReset 353,300 Nesbitt crossed blocks of 250,000 and 100,000, both at 26.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-25
Maturity Price : 25.00
Evaluated at bid price : 26.71
Bid-YTW : 2.59 %
BNS.PR.R FixedReset 63,880 Nesbitt bought four blocks from anonymous: 10,000 at 26.85, two blocks of 11,000 each, both at 26.89, and 11,000 at 26.90.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-25
Maturity Price : 25.00
Evaluated at bid price : 26.75
Bid-YTW : 3.03 %
TD.PR.P Perpetual-Discount 60,528 Nesbitt crossed 50,000 at 24.75.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-09-29
Maturity Price : 24.43
Evaluated at bid price : 24.66
Bid-YTW : 5.40 %
HSB.PR.E FixedReset 52,185 RBC crossed 24,200 at 28.15.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 28.03
Bid-YTW : 3.26 %
IGM.PR.B Perpetual-Discount 47,000 Desjardins crossed 38,400 at 25.10.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-01-30
Maturity Price : 25.00
Evaluated at bid price : 25.05
Bid-YTW : 5.83 %
There were 59 other index-included issues trading in excess of 10,000 shares.

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